AbbVie has demonstrated enough progress deleveraging its balance sheet, integrating its transformative acquisition of Allergan, and advancing its drug pipeline to earn a Dividend Safety Score upgrade from Borderline Safe to Safe. Progress across these areas is critical to protect the dividend in 2023 and beyond when blockbuster drug Humira (40% of sales) loses exclusivity in America. AbbVie will face fierce biosimilar competition eager to chip away at Humira's $16 billion of U.S. sales. When Humira lost patent protection in Europe in late 2018, the drug's revenue slumped 45% in the first year. Management expects a similar result in the U.S., implying the firm could lose at least $8 billion of sales (15% of total revenue) in a single year. Company-wide sales are [...]

Realty Income on Thursday announced plans to acquire VEREIT, a retail REIT about half of its size. The all-stock transaction is expected to close in the fourth quarter of 2021. This large acquisition will not impact Realty Income's dividend policy. If anything, the REIT's dividend coverage should improve moderately. Management expects the deal to increase Realty's adjusted funds from operations (AFFO) per share by at least 10% in year one. Based on the firm's current dividend level and 2021 AFFO guidance, we estimate Realty's pro forma AFFO payout ratio would be 74% this year versus 81% on a standalone basis. 

Since announcing in July 2019 plans to spin off its established drug business, Pfizer has communicated it would lower its dividend to reflect its reduced standalone cash flow. However, income investors were expected to be kept whole after accounting for the new dividend to be paid by the spinoff, Viatris. This dividend adjustment was expected to occur during the second quarter when Viatris declared its first dividend. But Pfizer on Thursday announced that it will now keep its full dividend intact going forward, resulting in an effective raise for shareholders: "The board has decided to maintain Pfizer’s quarterly dividend at its current rate despite the planned declaration of a dividend payment by Viatris Inc. that would be payable to those Pfizer shareholders that have elected [...]

The Biden administration is considering proposals to ban menthol and reduce nicotine levels in cigarettes to non-addictive levels, the Wall Street Journal reported on Monday. If these policies move forward, they will almost certainly face legal challenges from the tobacco industry and take years to implement. Altria’s short-term outlook arguably has not changed. But the long-term consequences of these policies, if enacted, could be severe. Lowering nicotine levels has for decades been discussed as a potential endgame for combustible cigarettes. With less of this addictive chemical in each cigarette, more smokers would quit or pursue other forms of nicotine delivery, and prospective smokers may never develop the habit.